The Loss of “Economic Engines” and the Trickle-Down Effect
When Mitsubishi shut down and State Farm downsized, our community directly felt the impact of losing these "economic engines." An economic engine business hires local and brings in money from outside the area. Engines are the backbone of a strong local economy because of the numerous other local businesses that support them and those who work there. With the loss of an economic engine comes a trickle-down effect—the local businesses that directly support the larger businesses shut down, as well.
In addition, State Farm’s downsizing and Mitsubishi’s closing resulted in a significant portion of our population relocating to other areas. The many businesses that offered goods and services to these employees likewise suffered significant losses through the trickle-down effect.
For example, the employees who work for these engine businesses need a place to live, so we have an entire housing industry. They also need food, so we have grocery stores. They go out to restaurants and spend money at entertainment venues. They are patients of local doctors. And the list goes on. When these people move out of the area, they no longer shop at local stores, eat at local restaurants, or visit local doctors. Thus, the trickle-down effect impacts many smaller businesses.
Attracting and Growing Engine Businesses
To reestablish a strong backbone for our economy, we must focus on attracting new economic engines and growing our current ones. Just as the loss of a primary business has a negative trickle-down effect, so also the strengthening of one produces a positive effect. Building up these primary businesses creates secondary benefits down the line to retail stores, restaurants, entertainment, housing, and medical facilities.
A stronger engine also means increased sales and property tax revenue from not only the engine, but also the support businesses and those that offer goods and services.
The Town of Normal must be aggressive in promoting this kind of trickle-down growth.
Economic Incentives: The Problem with the Current Council’s Incentives Approach
Over the last few years, the council has persisted in handing out incentives to businesses that do not provide a net economic benefit to the community.
Instead of investing in organizations that actually drive our growth, the town council has voted repeatedly to offer economic incentives to businesses that extract dollars from our community—such as retail, restaurants, and luxury apartments.
Note that these businesses have told us up front it is not profitable to be here unless they receive economic incentives or subsidies. This is not a wise use of our limited resources—it amounts to corporate welfare.
What the Council Should Address
The council has been giving out millions to make certain businesses (those they pick and choose) profitable, but they have been ignoring the real issues:
- Why it is not profitable for these businesses to establish in Normal without the Town giving them millions in incentives?
- Why does the current economic incentive program make it more beneficial for existing successful companies to leave Normal when they need to grow?
Clearly, we need to shift the council’s focus and determine why it is not profitable to establish and grow a business here, and what we can do about it.
Example: Luxury Apartments and Restaurant/Retail Space
The town council sought out and gave millions of taxpayer dollars to a for-profit company so it could build luxury apartments and restaurant/retail space in Uptown Normal.
- The first floor is for the restaurant/retail space. It has never been built out and currently stands empty, even after years on the market.
- The Town itself rents the entire second floor for only 23 staff members. The cost is nearly a half million per year.
- Floors three, four, and five are the luxury apartments. A one-bedroom unit rents for $1,700, and a three-bedroom unit rents for more than $4,200.
Every taxpayer should be irate to know we are subsidizing luxury apartments. If someone can afford a luxury apartment for $4,200+ per month (the equivalent of a $700,000 house), the council should not be subsidizing them. If tax dollars must subsidize housing, they should be spent for those who truly need the help.
Helping with “Red Tape”
Beyond economic issues, dealing with “red tape” is another significant, costly, and headache-producing aspect of doing business.
While most incentives have a monetary component, many businesses just want to have the support of the local municipality and assistance in cutting through that red tape. This kind of help can provide our local businesses with a sense of appreciation, which goes a long way, too, in attracting new businesses.
The Town does not currently have effective ways to actively help businesses navigate the rules, regulations, tax issues, and other aspects of establishing and growing a successful business. The current council has missed tremendous opportunities to benefit the community by failing to support businesses in this way.
We cannot continue to subsidize businesses that know it is not profitable to be in Normal without taxpayer money. When the town gives huge subsidies to fill the "gap" to make these businesses profitable, those businesses will be back at the table when the subsidies end, demanding the Town extend the assistance, or threatening to let employees go and close their doors.
The council has been giving money to these businesses and calling it “economic development.” But this is not economic development. True economic development would:
- Boost engine businesses that would cause other, smaller businesses to thrive.
- Create an environment where existing businesses could grow and flourish in our community.
- Produce revenue that would lower taxes for residents and create a downward trend in the cost of living.
The current council does not have the proper focus.
As a council person:
- I will insist the Town produce a clear analysis of the net economic benefit to the community before the council hands out economic incentives.
- I will work to change the council’s focus—the Town must be aggressive in attracting businesses that hire local employees and bring in dollars from outside our community.
- I will advocate for the creation of processes and packages that incentivize our existing businesses so they will stay and grow in Normal.
- I will change the way our current economic development program functions and ensure the program helps all businesses grow and thrive.
- I will work to establish a system to actively assist and encourage local businesses. This system, specifically, will designate a person with actual business experience who will directly contact every local business at least every other year and ask what the Town can do to help them grow, expand, and remain in Normal.